53 ABNORMAL DELAY IN EXECUTION OF ORDNANCE FACTORY PROJECT NALANDA MINISTRY OF DEFENCE PUBLIC ACCOUNTS COMMITTEE 2011-2012 FIFTY-THIRD REPORT FIFTEENTH LOK SABHA LOK SABHA SECRETARIAT NEW DELHI FIFTY-THIRD REPORT PUBLIC ACCOUNTS COMMITTEE (2011-2012) (FIFTEENTH LOK SABHA) ABNORMAL DELAY IN EXECUTION OF ORDNANCE FACTORY PROJECT NALANDA MINISTRY OF DEFENCE Presented to Lok Sabha on 30.3.2012 Laid in Rajya Sabha on 30.3.2012 LOK SABHA SECRETARIAT NEW DELHI March, 2012/Chaitra, 1934 (Saka) PAC No. 1968 Price: ` 44.00 ©2012 BY LOK SABHA SECRETARIAT Published under Rule 382 of the Rules of Procedure and Conduct of Business in Lok Sabha (Fourteenth Edition) and Printed by the General Manager, Government of India Press, Minto Road, New Delhi-110 002. CONTENTS PAGE COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2011-12) ..................... (iii) COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2010-11) ..................... (v) COMPOSITION OF THE SUB-COMMITTEE-I OF THE PUBLIC ACCOUNTS COMMITTEE (2010-11) ................................................................................... (vii) INTRODUCTION ............................................................................................... (ix) REPORT PART I I. Introductory .................................................................................... 1 II. Pendency of Audit Paras of the Ministry of Defence ................ 2 III. Abnormal Delay in Execution of Ordnance Factory Project Nalanda ........................................................................................... 5 A. Delay in Procurement of Plant and Machinery .................. 6 B. Lack of Synchronisation of Civil Works with Procurement of Plant and Machinery ........................................................ 19 C. Time and Cost Overrun ......................................................... 21 D. Deficiencies in Planning and Delays in Revised Cost Approvals............................................................................... 22 E. Inadequate Monitoring of the Project .................................. 25 PART II Observations and Recommendations ....................................... 26 APPENDICES I. Minutes of the Sixth sitting of Sub-Committee-I of the Public Accounts Committee (2010-11) held on 18th February, 2011 ...... 30 II. Minutes of the Nineteenth sitting of the Public Accounts Committee (2011-12) held on 22nd March, 2012 ............................ 32 COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2011-12) Dr. Murli Manohar Joshi — Chairman MEMBERS Lok Sabha 2. Shri Anandrao Vithoba Adsul 3. Dr. Baliram 4. Shri Sandeep Dikshit 5. Shri Anant Kumar Hegde 6. Shri Bhartruhari Mahtab 7. Shri Shripad Yesso Naik 8. Shri Sanjay Nirupam 9. Shri Jagdambika Pal 10. Dr. Kavuru Sambasiva Rao 11. Shri Adhi Sankar 12. Kunwar Rewati Raman Singh 13. Shri K. Sudhakaran 14. Dr. M. Thambidurai 15. Dr. Girija Vyas Rajya Sabha 16. Shri Tariq Anwar 17. Shri Prasanta Chatterjee 18. Shri Naresh Gujral 19. Shri Prakash Javadekar 20. Shri Satish Chandra Misra *21. Shri J.D. Seelam 22. Prof. Saif-ud-Din Soz SECRETARIAT 1. Shri Devender Singh — Joint Secretary 2. Shri Abhijit Kumar — Director *Elected w.e.f. 29th August, 2011 vide the vacancy occurred vice Smt. Jayanti Natarajan appointed Minister w.e.f. 12th July, 2011. (iii) COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2010-11) Dr. Murli Manohar Joshi — Chairman MEMBERS Lok Sabha 2. Shri Anandrao Vithoba Adsul 3. Dr. Baliram 4. Shri Ramen Deka 5. Shri Naveen Jindal 6. Shri Satpal Maharaj 7. Shri Bhartruhari Mahtab 8. Dr. K. Sambasiva Rao 9. Shri Yashwant Sinha 10. Shri Jitendra Singh (Alwar) 11. Kunwar Rewati Raman Singh 12. Shri K. Sudhakaran 13. Dr. M. Thambidurai 14. Shri D. Venugopal 15. Shri Aruna Kumar Vundavalli Rajya Sabha *16. Vacant 17. Shri N. Balaganga 18. Shri Prasanta Chatterjee 19. Shri Kalraj Mishra 20. Shri N.K. Singh 21. Shri Tiruchi Siva 22. Prof. Saif-ud-Din Soz SECRETARIAT 1. Shri Devender Singh — Joint Secretary 2. Shri Abhijit Kumar — Director *Vacancy occurred vice Shri Ashwani Kumar has been appointed as Minister of State w.e.f. 19th January, 2011. (v) COMPOSITION OF SUB-COMMITTEE-I OF THE PUBLIC ACCOUNTS COMMITTEE (2010-11) Shri Bhartruhari Mahtab — Convenor MEMBERS Lok Sabha 2. Shri Naveen Jindal — Alternate Convenor 3. Dr. K. Sambasiva Rao Rajya Sabha 4. Shri Kalraj Mishra (vii) INTRODUCTION I, the Chairman, Public Accounts Committee (2011-12) having been authorised by the Committee, do present this Fifty-third Report (Fifteenth Lok Sabha) on ‘Abnormal Delay in Execution of Ordnance Factory Project Nalanda’ based on Paragraph No. 6.3, Chapter VI of C&AG Report No. CA 4 of 2008 and Chapter II of C&AG Report No. 15 of 2010-2011 relating to the Ministry of Defence. 2. The above-mentioned Reports of the Comptroller and Auditor General of India was laid on the Table of the House on 14th March, 2008 and 20th August 2010 respectively. 3. Taking cognizance of the inordinate delay on the part of various Ministries/ Departments in furnishing the Action Taken Notes on the Non-selected Audit Paragraphs/Chapters/Reports within the stipulated time-frame, the Public Accounts Committee (2010-11) took up the subject for detailed examination and report. A Sub-Committee was specially constituted for the purpose. In due consultation with the Audit, it was decided to examine the position in respect of the Ministry of Defence alongwith some other Ministries/Departments. 4. In the process of the scrutiny of the Audit Paragraphs/Chapters/Reports pending with the Ministry of Defence, the Sub-Committee-I came across certain pending Paragraphs/Chapters on very important issues and considered it prudent to examine and report the same alongwith the Non-Compliance issue. Accordingly, the Sub-Committee-I took up the above-mentioned Paragraph of the respective Audit Report for in-depth examination. 5. The Sub-Committee-I took evidence of the representatives of the Ministry of Defence on 18th February, 2011. The Committee considered and adopted this Report at their sitting held on 22nd March, 2012. Minutes of the sittings form Appendices to the Report. 6. For facility of reference and convenience, the Observations and Recommenda- tions of the Committee have been printed in thick type in the body of the Report. 7. The Committee thank the Sub-Committee for their efforts in examining the subject in detail. 8. The Committee would also like to express their thanks to the officers of the Ministry of Defence for tendering evidence before the Sub-Committee and furnishing information that the Sub-Committee/Committee desired in connection with the examination of the subject. 9. The Committee place on record their appreciation of the assistance rendered to them in the matter by the Office of the Comptroller and Auditor General of India. NEW DELHI; DR. MURLI MANOHAR JOSHI 28 March, 2012 Chairman, 8 Chaitra, 1934 (Saka) Public Accounts Committee. (ix) REPORT PART I I. INTRODUCTORY The Finance Accounts and the Appropriation Accounts of the Union Govern- ment are audited yearly by the Comptroller and Auditor General of India (C&AG) in accordance with the CAG's (Duties, Powers and Conditions of Service) Act, 1971. As per Article 151 of the Constitution, the reports of the the C&AG stand referred to the PAC for their scrutiny after being laid in the the Parliament. The table given below shows the number of Audit Reports presented during each of the last three years and the number of Audit Paras contained therein. Sl. No. Year No. of Audit Reports Tabled No. of Paras 1. 2008 21 1701 2. 2009 17 1725 3. 2010 26 1265 Total 64 4691 2. As it becomes practically impossible for the Public Accounts Committee to examine each and every Audit Report, the Committee adopt a selective approach and take up relatively more important Reports/Chapters/Paragraphs for in depth examination at the beginning of their term every year. The Report paragraphs not selected for examination by the Committee are dealt with by means of a procedure whereby the Ministries/Departments are required to furnish the remedial/corrective Action Taken Notes to the Committee through the Ministry of Finance (Department of Expenditure). 3. As there was inordinate delay on the part of the Ministries/Departments in furnishing the remedial/corrective Action Taken Notes, the Committee in their 105th Report (Tenth Lok Sabha) had recommended that with effect from 31st March, 1996 the Action Taken Notes on all the Paragraphs of the Reports of the C&AG, which are not formally taken up by the PAC for examination, should be furnished to the Committee within four months of the laying of the Audit Reports. 4. During 2000-01, vide their 9th Report, the Committee decided that the remedial/ corrective Action Taken Notes furnished by the respective Ministries/Departments should be categorized by the Audit under three broad heads namely, “accepted”, “partially accepted”, and “not accepted”. In subsequent developments, the Committee 2 also decided that a brief on those Action Taken Notes which are categorized as 'not accepted' should be furnished by the Office of C&AG, clearly indicating the reasons for such categorization as well as the points of difference between the Audit and the Ministry/Department concerned. The Remedial Action Taken Notes and briefs on 'non-accepted' paras are then circulated to the Members of the Public Accounts Committee and after their consideration these Notes reach the stage of finality. 5. Even after putting this elaborate system in place, it came to the notice of the Committee that various